(Bloomberg) — Asian stocks were headed for an early slide on Monday after strong U.S. jobs data led traders to rethink the path forward for Federal Reserve interest rate cuts.
Read More from Bloomberg
Equity futures for Australia and Hong Kong fell, indicating further pressure on a gauge of the region's shares that has fallen in the previous three sessions. The Japanese market is closed for a holiday Monday. US stocks and Treasuries fell after Friday's report, with the S&P 500 falling 1.5% and the Nasdaq 100 losing 1.6%. The 10-year yield closed seven basis points higher at 4.76%, a level not seen since 2023.
Australian and New Zealand bond yields also climbed early on Monday. The dollar traded within tight ranges after strengthening against most major currencies on Friday, pushing the greenback's strength index to a two-year high. The yen was an outlier, clawing back a recent drop against the dollar following signs Bank of Japan officials are likely to discuss raising their inflation forecasts at a policy meeting later in January.
A sell-off in stocks and renewed energy for the dollar reflects the caution that has marked the opening weeks of the year as traders remain uncertain about the pace of Federal Reserve cuts and inflation.
Elsewhere, options traders are bracing for the pound to fall by as much as 8% more as the fiscal woes that prompted a painful sell-off across UK markets last week weigh on the currency.
In Asia, the data set for Monday's release includes December trade data for China and inflation for India. Separate figures on China's December money supply may also be released any time through January 15.
Economic data for China will offer investors further evidence of the challenges facing the world's second largest economy. Chinese stocks are facing their worst start to a year since 2016 after falling more than 5% in the first seven trading sessions of 2025.
Strong Jobs
Investors will shift their focus to signs of US inflation in data to be released this week, with the consumer price index report due out on Wednesday. They will also watch the New York Fed's one-year inflation expectations due on Monday, producer prices on Tuesday and jobless claims on Thursday.
The data will provide further clarity on the US economy after Friday's blowout non-farm payrolls figures. December saw the largest increase in employment in the United States in nine months and the unemployment rate fell unexpectedly, capping another year of resilience in the labor market. The data supported the idea that US rates could remain on hold for the foreseeable future, a forecast suggested by a handful of Fed officials over the past week.
Following Friday's jobs data, economists at some major banks revised their forecasts for additional Fed rate cuts.
Bank of America Corp., which previously expected a drop of two-quarters of a point this year, now expects nothing, and said there is a risk that a hike is the next move. Citigroup Inc. – whose rate cut forecast is among the most hopeful on Wall Street – is still looking for cuts of five quarter points, but says they will start in May. Goldman Sachs Group Inc. sees two cuts this year versus three.
“Investors may want to brace themselves for more volatility as the market recalibrates expectations for fewer cuts,” Gina Bolvin told Bolvin Wealth Management Group.
In corporate news, Johnson & Johnson is exploring a bid to acquire Intra-Cellular Therapes Inc., people familiar with the matter said. Bain Capital sweetened its bid for Insignia Financial Ltd. of Australia as takeover activity heats up for the wealth manager.
Jamie Dimon of JPMorgan Chase & Co. that tariffs, if used correctly, can help resolve issues such as unfair competition and national security.
In commodities, oil settled at a three-month high on Friday as the United States tightened sanctions against Russia, adding to a series of bullish developments that have led to a strong start to 2025.
Key events this week:
China Trade, Monday
India CPI, Monday
ECB Chief Economist Philip Lane and Governing Council member Olli Rehn speak in Hong Kong, on Monday
Argentina's CPI, Tuesday
US PPI, Tuesday
New York Fed President John Williams speaking, on Tuesday
Deputy Governor of the Bank of Japan, Ryozo Himino, speaks, on Tuesday
Eurozone industrial production, Wednesday
France CPI, Wednesday
UK CPI, Wednesday
US CPI, Wednesday
Chicago Fed President Austan Goolsbee, Minneapolis Fed President Neel Kashkari speak, Wednesday
ECB Governing Council Member Francois Villeroy de Galhau speaks, on Wednesday
Australian Unemployment, Thursday
German CPI, Thursday
Italian trade, CPI, Thursday
Poland rate decision, Thursday
South Korea rate decision, Thursday
UK industrial production, Thursday
US initial jobless claims, retail sales, import prices, Thursday
Bank of America, Morgan Stanley earnings, Thursday
TSMC earnings, Thursday
China GDP, property prices, retail sales, industrial production, Friday
Eurozone CPI, Friday
US housing starts, industrial production, Friday
Some of the main movements in markets:
Stocks
Currency
The euro was little changed at $1.0241
The Japanese yen was little changed at 157.81 per dollar
The offshore yuan was little changed at 7.3619 per dollar
Crypto currency
Bitcoin fell 0.5% to $93,904.01
Ether fell 0.8% to $3,239.84
Bonds
This story was produced with the help of Bloomberg Automation.
